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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ______________________
Commission File No. 333-27665
CONTINENTAL GLOBAL GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1506889
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
Continental Conveyor & Equipment Company Delaware 34-1603197
Goodman Conveyor Company Delaware 34-1603196
Continental Global Continental Conveyor
Group, Inc. & Equipment Company Goodman Conveyor Company
438 Industrial Drive 438 Industrial Drive Route 178 South
Winfield, Alabama 35594 Winfield, Alabama 35594 Belton, South Carolina 29627
(205) 487-6492 (205) 487-6492 (864) 338-7793
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 2000 was $-0-.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
As of March 15, 2000, there were 100 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
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CONTINENTAL GLOBAL GROUP, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item Page
Number Number
PART I
1 Business 1
2 Properties 4
3 Legal Proceedings 5
4 Submission of Matters to a Vote of Security Holders 5
PART II
5 Market for Registrant's Common Stock and Related
Stockholder Matters 5
6 Selected Financial Data 6
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
7A Quantitative and Qualitative Disclosures about Market Risk 12
8 Financial Statements and Supplementary Data 13
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 39
PART III
10 Directors and Executive Officers of the Registrant 39
11 Executive Compensation 41
12 Security Ownership of Certain Beneficial Owners and Management 42
13 Certain Relationships and Related Transactions 42
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 44
Signatures 45
Index of Exhibits 46
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PART I
ITEM 1. BUSINESS
GENERAL
Continental Global Group, Inc. (hereinafter referred to as the "Company") is a
holding company organized under the Delaware General Corporation law and
conducts all of its business through its direct and indirect operating
subsidiaries. The Company's direct operating subsidiaries are Continental
Conveyor and Equipment Company ("Continental") and Goodman Conveyor Company
("Goodman"). The Company also owns indirectly all of the capital stock of
Continental Conveyor & Equipment Pty. Ltd. ("CCE Pty. Ltd."), an Australian
holding company that owns all of the capital stock of four Australian operating
companies. The Company also owns indirectly all of the capital stock of
Continental Conveyor Ltd., a U.K. operating company, and Continental MECO (Pty.)
Ltd., a South African operating company. During 1998, the Company purchased the
majority of the assets and assumed certain liabilities constituting a majority
of the operations of Huwood International ("Huwood"), a U.K. belt conveyor
business. The operations of the Company's existing U.K. facilities were merged
with the Huwood operations.
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
mobile home products. The conveyor equipment business, which comprised
approximately 84.6%, 84.9%, and 83.4% of net sales for 1999, 1998, and 1997,
respectively, markets its products in four main business areas. The mining
equipment business area includes the design, manufacture and testing (and,
outside the United States, installation, monitoring and maintenance) of complete
belt conveyor systems and components for mining application primarily in the
coal industry. The conveyor components business area manufactures and sells
components for conveyor systems primarily for resale through distributor
networks. The engineered systems business area uses specialized project
management and engineering skills to combine mining equipment products,
purchased equipment, steel fabrication and other outside services for sale as
complete conveyor equipment systems that meet specific customer requirements.
The bulk conveyor equipment business area designs and manufactures a complete
range of conveyor equipment sold to transport bulk materials, such as cement,
lime, food products and industrial waste.
The Company's mobile home products business, which comprised approximately
14.3%, 14.0%, and 15.5% of net sales for 1999, 1998, and 1997, respectively,
manufactures and/or refurbishes axle components for the mobile home industry. As
part of this segment, the Company also sells mounted tires and rims to the
mobile home industry. Included in the other category is primarily the
manufacture and sale of air filtration equipment for use in enclosed
environments, principally in the textile industry. The manufacturing
requirements for these products are generally compatible with conveyor equipment
production and thus maximize utilization of the Company's manufacturing
facilities for its primary products.
Approximately 69.2% or $146.5 million of the Company's 1999 net sales were
produced in the United States, 18.5% or $39.2 million in Australia, and 12.3% or
$26.0 million in other countries.
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ACQUISITIONS
On August 6, 1998, the Company completed the purchase of assets and assumption
of liabilities constituting a majority of the operations of Huwood International
("Huwood"), a U.K. belt conveyor business and a division of FKI, Plc. Huwood
generated revenues of approximately $13,800,000 for the fiscal year ended March
31, 1998. The purchase price for the net assets was approximately $4,966,000.
The transaction was accounted for as a purchase and accordingly, the results of
operations since the date of acquisition have been included in the consolidated
financial statements. The operations of the Company's existing U.K. facilities
were merged with the Huwood operations.
The Company will continue to search for strategic acquisitions that add
complementary product lines, expand its technological capabilities, broaden its
geographic reach or otherwise support its business strategy and presently is in
discussions with other potential acquisition candidates. There can be no
assurance that the Company will be able to identify other desirable acquisition
candidates or that the Company will be successful in consummating any
acquisition on terms favorable to the Company, if at all.
CUSTOMERS
The Company's conveyor equipment business segment markets its products worldwide
through a variety of marketing channels with different customer focuses. The
Company sells its mining equipment and bulk conveyor equipment products and
services primarily to mining companies and other end users, original equipment
manufactures and engineering contractors. The Company sells its conveyor
components products to original equipment manufactures, engineering contractors
and replacement part distributors, primarily in the following industries:
aggregates, such as rock, gravel, glass and cement materials; coal processing
and mining; pulp, paper and forest products; above ground hard rock and mineral
mining; food and grains; and environmental, sewage and waste water treatment.
The Company sells its engineered systems' products and services primarily to
contractors and end users for applications in coal processing and mining, pulp
and paper, composting systems, grain handling, cement products, open-pit mining
and tunneling. The Company markets its mobile home products business segment
directly to mobile home manufacturers in the United States.
For the year ended December 31, 1999, sales to the Company's largest customer,
A.T. Massey Group, constituted approximately 11.6% of the Company's total net
sales. Sales to A.T. Massey Group were to 22 different mining properties in the
United States. Net sales to the Company's top five conveyor equipment customers
represented approximately 21.6% of the Company's total net sales for 1999.
Although the Company has preferred supplier arrangements with a number of its
major customers pursuant to which the Company and such customers effectively
operate on a long-term basis, such arrangements generally are not governed by
long-term contracts and may be terminated by either party at any time. A
substantial portion of the Company's sales is on a project by project basis.
For the year ended December 31, 1998, sales to A.T. Massey Group constituted
approximately 13.0% of the Company's total net sales and sales to MIM Holdings
were approximately 12.2% of the Company's total net sales. For the year ended
December 31, 1997, sales to A.T. Massey Group constituted approximately 13.1% of
the Company's total net sales.
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COMPETITION
The Company faces strong competition throughout the world in all of its product
lines. The various markets in which the Company competes are fragmented into a
large number of competitors, many of which are smaller businesses that operate
in relatively specialized or niche areas. In addition, a number of the Company's
competitors have financial and other resources greater than those of the
Company. Competitive considerations vary for each business area, but generally
include quality, price, reliability, availability and service.
SUPPLIERS
The primary raw materials used by the Company to produce its products are steel
and miscellaneous purchased parts such as bearings, electric motors and gear
reducers. All materials are readily available in the marketplace. The Company is
not dependent upon any single supplier for any materials essential to its
business or that are not otherwise commercially available. The Company has been
able to obtain an adequate supply of raw materials and no shortage of raw
materials is currently anticipated.
BACKLOG
Backlog at December 31, 1999, was $29.7 million, a decrease of $17.1 million, or
37% from $46.8 million at December 31, 1998. The decrease is primarily
attributable to a $16.6 million reduction in backlog at the Company's Australian
operations. The Company expects to ship in excess of 95% of the backlogs in
2000.
EMPLOYEES
As of December 31, 1999, the Company had approximately 1,260 employees,
approximately 830 of whom were located in the United States. Approximately 180
of the employees at the Company's Winfield, Alabama facility are represented by
The United Steelworkers of America Union and are covered by a four year
collective bargaining agreement that expires in 2002. Approximately 140 of the
production employees at the Company's United Kingdom and South African
facilities are covered by a collective bargaining agreement that expires in
2000. Approximately 50 of the Company's production employees in Australia are
covered by a collective bargaining arrangement expiring in 2001. The Company has
not experienced any work stoppages since 1971 and believes its relations with
its employees are good.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The Company is subject to a variety of environmental standards imposed by
federal, state, local and foreign environmental laws and regulations. The
Company is also subject to the federal Occupational Health and Safety Act and
similar foreign and state laws. The Company periodically reviews its procedures
and policies for compliance with environmental and health and safety laws and
regulations and believes that it is in substantial compliance with all such
material laws and regulations applicable to its operations. Historically the
costs of compliance with environmental, health and safety requirements have not
been material to the Company's subsidiaries.
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ITEM 2. PROPERTIES
The Company conducts its operations through the following primary facilities:
APPROXIMATE
SQUARE PRINCIPAL OWNED/
LOCATION FOOTAGE FUNCTION LEASED
UNITED STATES:
Winfield, Alabama 220,000 Headquarters, Owned
manufacturing
Belton, South Carolina 191,000 Administration, Owned
manufacturing
Salyersville, Kentucky 111,000 Manufacturing Owned
Pueblo, Colorado 75,600 Manufacturing Owned
Eatonton, Georgia 22,000 Administration, Leased(1)
manufacturing
AUSTRALIA:
Gosford, New South Wales 8,765 Administration, Leased(2)
engineering,
and sales
Somersby, New South Wales 42,000 Manufacturing Owned
MacKay, Queensland 32,000 Manufacturing, and Leased(3)
installation
support
Minto, New South Wales 22,173 Manufacturing Owned
ENGLAND
Gateshead, UK 234,810 Administration, Leased(4)
engineering,
sales, and
manufacturing
SOUTH AFRICA
Alrode, South Africa 24,456 Administration, Leased(5)
manufacturing
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(1) Expires in October 2003. The Company holds an option to buy such property at
the end of the lease term.
(2) Expires in April 2000. The Company will move to Somersby upon expiration.
(3) Current lease is month to month and the Company is looking for smaller
premises.
(4) Expires in August 2003 with option to renew for additional five years with
option to purchase at market value.
(5) Expires in May 2000. The Company is negotiating extension of lease.
In addition to the foregoing facilities, the Company has a number of leased
warehouses and field sales offices in various locations throughout the United
States and Australia. The Company believes that substantially all of its
property and equipment is in a condition appropriate for its operations and that
it has sufficient capacity to meet its current operational needs. Each of the
Company-owned United States facilities is subject to a mortgage securing payment
of indebtedness under the Revolving Credit Facility. In addition, the Company's
owned facilities in Australia are subject to mortgage securing payment of
indebtedness under the Australian Revolving Credit Facility. See Note E,
"Financing Arrangements," to the Consolidated Financial Statements.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding which it believes
could have a material adverse effect upon its results of operations or financial
condition, or to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1999, NES Group, Inc., the Company's sole
stockholder, by written consent, re-elected all members of the Company's Board
of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is a direct wholly-owned subsidiary of NES Group, Inc. There is no
established public trading market for the Company's common stock. As of March
15, 2000, the Company had one stockholder. The Company paid no dividends in 1999
or 1998. See Note E, "Financing Arrangements", to the Consolidated Financial
Statements, Part II, Item 8, for limitations on dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial and operating data of the
Company for each of the five years in the period ended December 31, 1999. The
data should be read in conjunction with the Consolidated Financial Statements
and related Notes included in this report on Form 10-K.
1999 1998 (1) 1997 (2) 1996 1995
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(Data in 000's)
INCOME STATEMENT DATA:
Net sales $211,720 $252,072 $213,517 $143,524 $153,231
Gross profit 31,764 42,936 43,112 28,808 28,283
Operating income 5,316 14,331 20,013 12,037 14,422
Interest expense 15,225 14,658 12,308 2,889 2,506
Net income (loss) (8,728) 1,175 7,838 9,872(3) 11,785
OTHER DATA:
Depreciation and amortization 3,550 3,393 2,708 1,012 894
Operating cash flows (12,261) 8,592 10,176 9,873 10,550
EBITDA (4) 10,240 18,912 22,868 12,841 15,185
Ratio of earnings to fixed
charges (5) -- 1.08 1.64 3.69 4.96
BALANCE SHEET DATA:
Cash and cash equivalents 18,300 26,351 30,883 1,022 295
Total assets 122,903 145,757 129,725 46,499 46,195
Long-term debt, including
current portion 126,028 123,322 129,870 14,143 16,837
Stockholder's equity (deficit) (45,878) (37,506) (35,973) 1,994 (3,862)
(1) Reflects the acquisition during 1998 of Huwood as described in Note B of
Notes to Consolidated Financial Statements.
(2) Reflects the acquisitions during 1997 of BCE, Hewitt-Robins, and MECO as
described in Note B of Notes to Consolidated Financial Statements.
(3) Includes extraordinary gain on early extinguishment of debt of $932.
(4) EBITDA represents earnings before extraordinary items, interest, taxes,
depreciation, amortization, and restructuring charges. EBITDA has been
included because the Company uses it as one means of analyzing its ability
to service its debt, the Company's lenders use it for the purpose of
analyzing the Company's performance with respect to the credit agreement and
the Indenture, and the Company understands that it is used by certain
investors as a measure of a Company's historical ability to service debt.
(5) Earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and one-third of rent expense from operating leases, which management
believes is a reasonable approximation of an interest factor. Earnings were
inadequate to cover fixed charges in the year ended December 31, 1999, by
$8,728.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, on a comparative basis, certain income statement
data as a percentage of net sales for the fiscal years ended December 31, 1999,
1998, and 1997.
Year ended December 31
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1999 1998 1997
Net sales 100.0% 100.0% 100.0%
Cost of products sold 85.0 83.0 79.8
Gross profit 15.0 17.0 20.2
SG&A expenses 11.5 10.2 9.7
Management fee 0.2 0.4 0.8
Amortization expense 0.3 0.3 0.3
Restructuring charge 0.5 0.4 --
Operating income 2.5 5.7 9.4
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales
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Net sales decreased $40.4 million, or 16%, from $252.1 million in 1998 to $211.7
million in 1999. Net sales in the conveyor equipment segment decreased by $34.9
million. The decrease in the conveyor equipment segment primarily resulted from
a decrease in domestic conveyor equipment sales of $16.3 million and a decrease
in sales at the Australian subsidiary of $21.9 million, partially offset by
increased sales in the United Kingdom and South African subsidiaries of $3.3
million. The decrease in domestic conveyor sales is the result of reduced
capital purchases in the U.S. coal industry that the Company believes were
significantly related to excessive coal inventory levels. The sales decrease in
Australia is due to the completion of major projects in the first quarter of
1999 that started in the second quarter of 1998. The Company believes that the
increase in sales in the United Kingdom is primarily attributable to the impact
of the acquisition of Huwood. Net sales in the Company's mobile home products
segment and other segment decreased by $4.9 million and $0.6 million,
respectively. The decrease in the mobile home products segment is attributable
to regional softness in the mobile home market.
Gross Profit
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Gross profit decreased $11.1 million, or 26%, from $42.9 million in 1998 to
$31.8 million in 1999. Gross profit in the conveyor equipment segment decreased
by $10.1 million and gross profit in the mobile home products segment and other
segment decreased by $0.8 million and $0.2 million, respectively. While gross
profit margins as a percentage of sales in the Company's domestic conveyor
equipment operations showed a small improvement, gross profit decreased by $3.0
million primarily due to decreased sales volume caused by reduced capital
purchases in the U.S. coal industry. Gross profit in the foreign conveyor
equipment operations declined by $7.1 million, primarily in the Australian
operation, in part due to lower sales volume and competitive market conditions,
and primarily due to lower margins resulting from subcontract cost overruns on
major fixed-price contracts in 1999.
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SG&A Expenses
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Selling, general, and administrative expenses decreased $1.6 million, or 6%,
from $25.9 million in 1998 to $24.3 million in 1999. This decrease is the result
of the favorable impact of the restructuring initiatives in the foreign
subsidiaries combined with a reduction in domestic manpower that occurred in the
third quarter of 1999.
Operating Income
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Operating income decreased $9.0 million, or 63%, from $14.3 million in 1998 to
$5.3 million in 1999. The decrease is the result of the $11.1 million decrease
in gross profit, offset by the $1.6 million decrease in SG&A expenses and a $0.5
million decrease in management fees. Management fees are calculated as 5% of the
Company's Adjusted EBITDA earnings (earnings before interest and estimated
taxes, depreciation, amortization, and miscellaneous expense or income) under
the terms of the Management Agreement with Nesco, Inc.
Restructuring Charges
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The Company incurred restructuring charges of approximately $1,106,000 and
$1,127,000 in 1999 and 1998, respectively, related to its Australian and United
Kingdom subsidiaries. In 1998, the Company executed a plan to close certain
Australian manufacturing facilities and merge the operations with other existing
facilities; in 1999, the Company made further reductions in office staff and
facilities. In the United Kingdom, following the acquisition of Huwood in August
1998, the Company consolidated its existing operations and facilities into the
Huwood operations. These restructuring charges consist primarily of severance of
approximately 210 employees and relocation costs. As of December 31, 1999, the
Company's Australian and United Kingdom subsidiaries have paid approximately
$2,151,000 of the charges incurred to date. The Company anticipates that an
additional cost for relocation of $129,000 will be incurred in 2000. These costs
will be expensed as paid.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales
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Net sales increased $38.6 million, or 18%, from $213.5 million in 1997 to $252.1
million in 1998. Net sales in 1998 include a full year's results from
Hewitt-Robins and MECO, which were acquired on April 1, 1997 and October 17,
1997, respectively, and the current year's results from Huwood, which was
acquired on August 6, 1998. These acquisitions accounted for $28.0 million of
this increase. The Company's Australian subsidiary contributed $14.5 million of
the increase due to the substantial completion of several large contracts during
1998. Net sales at the Company's other foreign subsidiaries increased $5.6
million. This increase was partially offset by a sales decrease of $12.1 million
in the Company's domestic conveyor equipment business due to capital spending
reductions by certain key customers in the mining equipment business area. Sales
in the Company's mobile home products segment increased by $2.2 million and
sales in the Company's other business segment increased by $0.4 million.
Gross Profit
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Gross profit decreased $0.2 million, or 1%, from $43.1 million in 1997 to $42.9
million in 1998. The acquisitions of Hewitt-Robins, MECO, and Huwood resulted in
an increase of $4.8 million. Gross profit at the Company's domestic conveyor
equipment operations decreased $3.4 million due to reduced sales volumes. Gross
profit at the Company's foreign operations decreased $1.7 million. This decrease
in profit margin was primarily due to lower margins on major contracts in the
Company's Australian operations. Gross profit in the Company's mobile home
products and other business segments increased by $0.1 million.
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SG&A Expenses
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Selling, general, and administrative expenses increased $5.0 million, or 24%,
from $20.9 million in 1997 to $25.9 million in 1998. The acquisitions of
Hewitt-Robins, MECO and Huwood accounted for $4.0 million of the increase. SG&A
expenses at the Company's foreign subsidiaries increased by $0.8 million due to
the increase in sales. Of the remaining increase, $0.1 million is attributable
to the Company's mobile home products business segment and $0.2 million is
attributable to corporate expenses at Continental Global, parent company.
Operating Income
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Operating income decreased $5.7 million, or 29%, from $20.0 million in 1997 to
$14.3 million in 1998. The decrease is the result of the $0.2 million decrease
in gross profit, combined with an increase in SG&A expenses of $5.0 million, an
increase in amortization expense of $0.1 million, and restructuring charges of
$1.1 million. This was offset by a decrease in management fees of $0.7 million
attributable to Adjusted EBITDA earnings. The restructuring charges relate to
the Company's Australian subsidiary and the consolidation of facilities in the
United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities was $(12.3) million, $8.6
million, and $10.2 million for the years ending December 31, 1999, 1998, and
1997, respectively. The decrease in operating cash flows from 1998 to 1999 is
primarily the result of the current year net loss and a net decrease in
operating assets and liabilities. The significant changes in operating assets in
1999 and 1998, specifically accounts receivable, inventories and accounts
payable, are the result of significantly higher 1998 fourth quarter sales at the
Company's Australian subsidiary. The decrease in operating cash flows from 1997
to 1998 is due to lower net income resulting from increased operating expenses
and decreased margins.
Net cash used in investing activities was $2.9 million, $7.9 million, and $22.7
million for the years ending December 31, 1999, 1998 and 1997, respectively. Net
cash used in investing activities in 1999 represents net purchases of property,
plant, and equipment. Investing activities in 1998 include the acquisition of
Huwood for $5.0 million and net purchases of property, plant, and equipment for
$2.9 million. The net cash used in investing activities in 1997 is the result of
the acquisitions of BCE for $7.2 million, Hewitt-Robins for $12.9 million, and
Tufkon for $0.7 million. The acquisition of MECO resulted in an increase in cash
of $1.5 million, net of notes issued. The balance of expenditures for investing
activities in 1997, $3.4 million, represents net purchases of property, plant,
and equipment.
Net cash provided by (used in) financing activities was $7.0 million, $(4.9)
million, and $41.7 million for the years ending December 31, 1999, 1998, and
1997, respectively.
Net cash provided by financing activities in 1999 primarily represents a net
increase in borrowings on notes payable of $6.0 million and proceeds from
long-term obligations of $5.5 million, offset by principal payments on long-term
obligations of $3.2 million. The Company's domestic subsidiaries account for
$5.8 million of the net increase in borrowings on notes payable. The proceeds
from long-term obligations include a note payable of $1.6 million that was used
for the purchase of a previously leased manufacturing facility in Colorado, a
note payable of approximately $0.9 million that was used for the construction of
a new idler line at the Company's domestic operations, and a term loan of
approximately $2.9 million at the Company's Australian subsidiary. The proceeds
of the term loan in Australia were used to pay the outstanding balance of the
BCE Seller Notes for approximately $2.1 million, and the balance for working
capital. The Company also paid distributions for income taxes under the Tax
Payment Agreement of $1.3 million, $1.2 million of which was for 1998 income
taxes.
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The net cash used in financing activities in 1998 is primarily a result of the
Company's reduction in long-term obligations of $6.4 million. This includes
payment in full of the promissory note payable to Joy Technologies, Inc. in the
amount of $5.2 million. The Company also paid distributions for income taxes
under the Tax Payment Agreement of $0.7 million. This was offset by a net
increase in borrowings on notes payable of $2.2 million.
The net cash provided by financing activities of $41.7 million in 1997 is the
result of the issuance of $120.0 million of senior notes. At the time of the
debt offering, the Company paid dividends to its sole stockholder in the amount
of $40.0 million and paid financing fees in the amount of $5.2 million. In
connection with the BCE acquisition in 1997, $2.9 million was paid to former
shareholders of BCE. The Company reduced its borrowings on notes payable and
long-term obligations by $12.9 million and $18.8 million, respectively. The
Company received proceeds from long-term obligations of $4.8 million. The
Company paid distributions to fund the payment of income taxes under the Tax
Payment Agreement in the amount of $3.3 million.
The Company's primary capital requirements consist of capital expenditures and
debt service. The Company expects current financial resources (working capital)
and funds from operations to be adequate to meet anticipated cash requirements.
In 2000, the Company anticipates capital expenditures of approximately $2.7
million for new and replacement equipment. At December 31, 1999, the Company had
cash and cash equivalents of $18.3 million and a credit facility line with $19.8
million available for use.
INTERNATIONAL OPERATIONS
The Company transacts business in a number of countries throughout the world and
has facilities in the United States, Australia, the United Kingdom, and South
Africa. As a result, the Company is subject to business risks inherent in
non-U.S. operations, including political and economic uncertainty, import and
export limitations, exchange controls and currency fluctuations. The Company
believes that the risks related to its foreign operations are mitigated by the
relative political and economic stability of the countries in which its largest
foreign operations are located. As the U.S. dollar strengthens and weakens
against foreign currencies in which the Company transacts business, its
financial results will be affected. The principal foreign currencies in which
the Company transacts business are the Australian dollar, the British pound
sterling, and the South African rand. The fluctuation of the U.S. dollar versus
other currencies resulted in increases (decreases) to stockholder's equity of
approximately $0.5 million and $(0.8) million for the years ended December 31,
1999 and 1998, respectively.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company expended
approximately $1.1 million in connection with remediating its systems. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and services of
third parties. The Company will continue to monitor its computer applications
and those of its suppliers and vendors throughout the Year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
10
13
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended by FASB Statement 137, is
required to be adopted no later than January 1, 2001. Statement 133 requires all
derivatives to be recognized as either assets or liabilities in the balance
sheet and be measured at fair value. The Company is currently evaluating
Statement 133 and because the Company expects to have a minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a material effect on earnings or the financial position of
the Company.
CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains forward-looking statements within the meaning of the
federal securities laws. As a general matter, forward-looking statements are
those focused upon future plans, objectives or performance as opposed to
historical items and include statements of anticipated events or trends and
expectations and beliefs relating to matters that are not historical in nature.
Such forward looking statements are subject to uncertainties and factors
relating to the Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the Company,
that could cause actual results of the Company to differ materially from those
matters expressed in or implied by such forward-looking statements.
11
14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following tables provide information about the Company's financial
instruments that are sensitive to changes in interest rates. The tables present
principal cash flows and related weighted-average interest rates by expected
maturity dates for debt obligations as of December 31, 1999 and 1998.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
(DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------
Fair
Value,
As of December 31, 1999: 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
- ----------------------------------------------------------------------------------------------------------
Long-Term Obligations,
including current
portion
Fixed Rate $2,874 $ 237 $ 257 $ 280 $ 286 $121,200 $125,134 $67,489
Average interest rate 11% 11% 11% 11% 11% 11%
Variable Rate $ 21 $ 12 $ 14 $ 16 $ 18 $ -- $ 81 $ 81
Average interest rate 16% 16% 16% 16% 16%
- ----------------------------------------------------------------------------------------------------------
Fair
Value,
As of December 31, 1998: 1999 2000 2001 2002 2003 Thereafter Total 12/31/98
- ----------------------------------------------------------------------------------------------------------
Long-Term Obligations,
including current
portion
Fixed Rate $ -- $ -- $ -- $ -- $ -- $120,000 $120,000 $103,200
Average interest rate 11% 11% 11% 11% 11% 11%
Variable Rate $ 735 $ 735 $ 632 $ -- $ -- $ -- $ 2,102 $ 2,102
Average interest rate 6% 6% 6%
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents as well as
interest paid on its debt. To mitigate the impact of fluctuations in U.S.
interest rates, the Company generally borrows on a long-term basis to maintain a
debt structure that is fixed rate in nature.
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures and sells its
products in the United States, Australia, the United Kingdom, and South Africa.
As a result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its products.
The Company's operating results are exposed to changes in exchange rates between
the U.S. dollar and the Australian dollar, the British pound sterling, and the
South African rand.
12
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Report of Independent Auditors and the Consolidated Financial Statements of
Continental Global Group, Inc. for each of the three years in the period ended
December 31, 1999 are included herein.
13
16
Report of Independent Auditors
To the Stockholder
Continental Global Group, Inc.
We have audited the accompanying consolidated balance sheets of Continental
Global Group, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholder's equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Continental Global
Group, Inc. at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 28, 2000
14
17
Continental Global Group, Inc.
Consolidated Balance Sheets
As of December 31
----------------------------
1999 1998
ASSETS:
Current assets:
Cash and cash equivalents $ 18,299,610 $ 26,350,700
Accounts receivable, less allowance for
doubtful accounts of $700,220 in 1999
and $797,043 in 1998 30,469,614 44,423,640
Inventories 31,327,817 32,249,917
Other current assets 1,940,793 2,273,333
----------------------------
Total current assets 82,037,834 105,297,590
Property, plant and equipment 27,007,610 23,815,213
Less accumulated depreciation 10,305,220 8,048,953
----------------------------
16,702,390 15,766,260
Goodwill 19,642,467 19,669,858
Deferred financing costs 3,769,291 4,289,194
Other assets 750,845 734,389
----------------------------
$122,902,827 $145,757,291
============================
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT):
Current liabilities:
Notes payable $ 8,600,499 $ 2,661,508
Trade accounts payable 21,506,028 40,522,707
Accrued compensation and employee benefits 5,090,694 5,342,206
Accrued interest on senior notes 3,300,000 3,300,000
Other accrued liabilities 4,255,416 8,115,497
Current maturities of long-term obligations 3,140,588 1,095,106
----------------------------
Total current liabilities 45,893,225 61,037,024
Senior notes 120,000,000 120,000,000
Other long-term obligations,
less current maturities 2,887,477 2,226,461
Stockholder's equity (deficit):
Common stock, no par value, authorized
1,500 shares, issued and outstanding
100 shares at stated value of $5 per share 500 500
Paid-in capital 1,993,188 1,993,188
Accumulated deficit (45,081,586) (36,203,815)
Accumulated other comprehensive loss (2,789,977) (3,296,067)
----------------------------
(45,877,875) (37,506,194)
----------------------------
$122,902,827 $145,757,291
============================
See notes to consolidated financial statements.
15
18
Continental Global Group, Inc.
Consolidated Statements of Operations
Years ended December 31
--------------------------------------------
1999 1998 1997
Net sales $211,720,429 $252,072,484 $213,517,026
Cost of products sold 179,956,228 209,136,242 170,404,976
--------------------------------------------
Gross profit 31,764,201 42,936,242 43,112,050
Operating expenses:
Selling and engineering 14,980,861 16,486,633 13,658,329
General and administrative 9,276,131 9,394,792 7,187,870
Management fee 466,615 932,820 1,668,489
Amortization expense 618,533 663,478 584,051
Restructuring charge 1,106,345 1,127,482 --
--------------------------------------------
Total operating expenses 26,448,485 28,605,205 23,098,739
--------------------------------------------
Operating income 5,315,716 14,331,037 20,013,311
Other expenses:
Interest expense 15,225,465 14,658,149 12,307,589
Interest income (913,975) (1,568,086) (924,842)
Miscellaneous, net (267,499) (60,786) 449,279
--------------------------------------------
Total other expenses 14,043,991 13,029,277 11,832,026
--------------------------------------------
Income (loss) before foreign
income taxes (8,728,275) 1,301,760 8,181,285
Foreign income taxes -- 127,166 343,342
--------------------------------------------
Net income (loss) $ (8,728,275) $ 1,174,594 $ 7,837,943
============================================
See notes to consolidated financial statements.
16
19
Continental Global Group, Inc.
Consolidated Statements of Stockholder's Equity (Deficit)
Accumulated
Partners' Other
Capital Common Paid-in Accumulated Comprehensive
(Deficiency) Stock Capital Deficit Income (Loss) Total
----------------------------------------------------------------------------------
Balance at December 31, 1996 $ 1,888,245 $ -- $ -- $ -- $ 105,443 $ 1,993,688
Transfer of Partners' Capital
and formation of Continental
Global Group, Inc. (1,888,245) 500 1,993,188 -- (105,443) 0
Comprehensive income:
Net income -- -- -- 7,837,943 -- 7,837,943
Foreign currency
translation adjustment -- -- -- -- (2,509,820) (2,509,820)
-----------
Total comprehensive income 5,328,123
Dividend -- -- -- (40,000,000) -- (40,000,000)
Distributions for income taxes -- -- -- (3,294,667) -- (3,294,667)
----------------------------------------------------------------------------------
Balance at December 31, 1997 0 500 1,993,188 (35,456,724) (2,509,820) (35,972,856)
Comprehensive income:
Net income -- -- -- 1,174,594 -- 1,174,594
Foreign currency
translation adjustment -- -- -- -- (786,247) (786,247)
----------
Total comprehensive income 388,347
Distributions for income taxes -- -- -- (1,921,685) -- (1,921,685)
----------------------------------------------------------------------------------
Balance at December 31, 1998 0 500 1,993,188 (36,203,815) (3,296,067) (37,506,194)
Comprehensive income (loss):
Net loss -- -- -- (8,728,275) -- (8,728,275)
Foreign currency
translation adjustment -- -- -- -- 506,090 506,090
----------
Total comprehensive loss (8,222,185)
Distributions for income taxes -- -- -- (149,496) -- (149,496)
----------------------------------------------------------------------------------
Balance at December 31, 1999 $ -- $ 500 $1,993,188 $(45,081,586) $(2,789,977) $(45,877,875)
==================================================================================
See notes to consolidated financial statements.
17
20
Continental Global Group, Inc.
Consolidated Statements of Cash Flows
Years ended December 31
-------------------------------------------
1999 1998 1997
Operating activities:
Net income (loss) $ (8,728,275) $ 1,174,594 $ 7,837,943
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Provision for depreciation
and amortization 3,550,219 3,392,540 2,707,750
Amortization of deferred
financing costs 519,903 519,903 389,927
Provision for doubtful accounts 383,223 586,265 168,334
Loss (gain) on disposal of assets (450,868) (79,150) 23,925
Changes in operating assets and
liabilities:
Decrease (increase) in
accounts receivable 14,179,184 (11,166,742) (992,556)
Decrease (increase) in
inventories 1,170,026 (3,406,938) 1,543,591
Decrease (increase) in
other assets 485,303 (1,035,431) 438,157
Increase (decrease) in accounts
payable and other current
liabilities (23,370,152) 18,606,481 (1,940,789)
-------------------------------------------
Net cash provided by (used in) operating activities (12,261,437) 8,591,522 10,176,282
-------------------------------------------
Investing activities:
Purchases of property, plant, and equipment (4,030,367) (3,040,464) (3,638,116)
Proceeds from disposals of PP&E 1,091,350 150,143 208,525
Purchase of BCE, net of notes to seller -- -- (7,189,125)
Purchase of Hewitt-Robins -- -- (12,894,890)
Purchase of Tufkon -- -- (697,673)
Purchase of MECO, less cash acquired and
net of notes issued -- -- 1,507,506
Purchase of Huwood -- (4,966,050) --
--------------------------------------------
Net cash used in investing activities (2,939,017) (7,856,371) (22,703,773)
--------------------------------------------
Financing activities:
Proceeds from issuance of senior notes -- -- 120,000,000
Deferred financing costs -- -- (5,199,024)
Net increase (decrease) in borrowings
on notes payable 6,000,950 2,254,074 (12,859,918)
Proceeds from long-term obligations 5,516,166 -- 4,833,069
Principal payments on long-term obligations (3,212,088) (6,389,046) (18,803,055)
Distributions for income taxes (1,305,562) (745,581) (3,294,667)
Payment to former shareholders of BCE -- -- (2,927,300)
Dividends -- -- (40,000,000)
-------------------------------------------
Net cash provided by (used in) financing activities 6,999,466 (4,880,553) 41,749,105
Effect of exchange rate changes on cash 149,898 (386,631) 639,086
-------------------------------------------
Increase (decrease) in cash and cash equivalents (8,051,090) (4,532,033) 29,860,700
Cash and cash equivalents at beginning of year 26,350,700 30,882,733 1,022,033
-------------------------------------------
Cash and cash equivalents at end of year $ 18,299,610 $26,350,700 $ 30,882,733
===========================================
See notes to consolidated financial statements.
18
21
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
A. ORGANIZATION
Continental Global Group, Inc. (the "Company") was formed on February 4, 1997,
for the purpose of owning all of the common stock of Continental Conveyor &
Equipment Company ("CCE") and Goodman Conveyor Company ("GCC"). The Company,
which is a holding company with limited assets and operations other than its
investments in its subsidiaries, is a Subchapter S Corporation owned 100% by NES
Group, Inc.
Prior to January 1, 1997, CCE and GCC were limited partnerships under common
control by NES Group, Inc., the 99% limited partner. Effective January 1, 1997,
NES Group, Inc., transferred its interest in the limited partnerships to CCE and
GCC. Effective February 1997, NES Group, Inc. transferred to the Company all of
the outstanding capital stock of CCE and GCC.
B. ACQUISITIONS
On August 6, 1998, the Company completed the purchase of assets and assumption
of liabilities constituting a majority of the operations of Huwood International
(Huwood), a U.K. belt conveyor business and a division of FKI, Plc. Huwood
generated revenues of approximately $13,800,000 for the fiscal year ended March
31, 1998. The purchase price for the net assets was approximately $4,966,000.
The transaction was accounted for as a purchase and accordingly, the results of
operations since the date of acquisition have been included in the consolidated
financial statements. The operations of the Company's existing U.K. facilities
have been merged with the Huwood operations.
On October 17, 1997, the Company completed the acquisition of the MECO Belts
Group (MECO Belts) from Joy Mining Machinery, a subsidiary of Harnischfeger
Industries. MECO Belts is an international conveyor equipment company with
operations in the United States, United Kingdom, South Africa, and Australia.
The purchase price was approximately $7,200,000, including the issuance of a
note payable for $5,244,000, plus the assumption of approximately $5,000,000 of
liabilities. The Company has recorded approximately $100,000 of goodwill related
to the acquisition. The results of operations since the date of acquisition have
been included in the consolidated financial statements. The transaction was
accounted for as a purchase.
On August 8, 1997, the Company acquired substantially all of the assets of the
Tufkon Conveyor Components Division of Wyko, Inc. The purchase price for Tufkon
was approximately $698,000 in cash. The Company has recorded approximately
$350,000 of goodwill related to the acquisition. The results of operations since
the date of acquisition have been included in the consolidated financial
statements. The transaction was accounted for as a purchase.
On April 1, 1997, the Company acquired substantially all of the assets of the
Hewitt-Robins Conveyor Components Division of W.S. Tyler, Incorporated, a
manufacturer of idlers (Hewitt-Robins). The purchase price for Hewitt-Robins,
after working capital adjustments, was approximately $12,900,000 in cash plus
assumption of approximately $1,100,000 of liabilities. The Company has recorded
approximately $12,100,000 of goodwill related to the acquisition. The results of
operations since the date of acquisition have been included in the consolidated
financial statements. The transaction was accounted for as a purchase.
19
22
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
B. ACQUISITIONS -- CONTINUED
On January 7, 1997, the Company purchased the assets of BCE Holding Company Pty.
Ltd. in Australia (BCE), a major manufacturer and supplier of conveyor
equipment. The purchase price was $11,946,000. In addition, the Company
contributed $3,512,000 in capital to BCE after the acquisition. Financing
consisted of an advance on the revolving credit line of approximately
$6,800,000, an addition to the existing term loan of approximately $4,500,000,
and approximately $4,800,000 in seller financing. The Company has recorded
approximately $9,600,000 of goodwill related to the acquisition. The results of
operations since the date of acquisition have been included in the consolidated
financial statements. The transaction was accounted for as a purchase.
C. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue from sales at the time of shipment.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories, which consist of raw materials, manufactured and purchased parts,
and work in process are stated at the lower of cost or market. Since inventory
records are maintained on a job order basis, it is not practical to segregate
inventories into their major classes. The cost for approximately 62% and 58% of
inventories at December 31, 1999 and 1998, respectively, is determined using the
last-in, first-out ("LIFO") method with the remainder determined using the
first-in, first-out ("FIFO") method. Had the FIFO method of inventory (which
approximates replacement cost) been used to cost all inventories, inventories
would have increased by approximately $1,527,000 and $2,103,000 at December 31,
1999 and 1998, respectively.
GOODWILL
Goodwill is being amortized on a straight-line basis, primarily over 40 years.
The balance of accumulated amortization of goodwill was approximately $1,610,000
and $1,378,000 at December 31, 1999 and 1998, respectively. The ongoing value
and remaining useful life of goodwill are subject to periodic evaluation and the
Company currently expects the carrying amounts to be fully recoverable. If
events and circumstances indicate that goodwill might be impaired, an
undiscounted cash flow methodology would be used to determine whether an
impairment loss should be recognized.
20
23
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
C. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
RESTRUCTURING CHARGES
The Company incurred restructuring charges of approximately $1,106,000 and
$1,127,000 in 1999 and 1998, respectively, related to its Australian and United
Kingdom subsidiaries. In 1998, the Company executed a plan to close certain
Australian manufacturing facilities and merge the operations with other existing
facilities; in 1999, the Company made further reductions in office staff and
facilities. In the United Kingdom, following the acquisition of Huwood in August
1998, the Company consolidated its existing operations and facilities into the
Huwood operations. These restructuring charges consist primarily of severance of
approximately 210 employees and relocation costs. As of December 31, 1999, the
Company's Australian and United Kingdom subsidiaries have paid approximately
$2,151,000 of the charges incurred to date. The Company anticipates that an
additional cost for relocation of $129,000 will be incurred in 2000. These costs
will be expensed as paid.
INCOME TAXES
The Company and its domestic subsidiaries have elected Subchapter S Corporation
Status for United States income tax purposes. Accordingly, the Company's United
States operations are not subject to income taxes as separate entities. The
Company's United States income is included in the income tax returns of the
stockholder. Under the terms of the Tax Payment Agreement with the stockholder,
the Company makes monthly distributions to the stockholder for payment of income
taxes.
The Company has subsidiaries located in Australia, the United Kingdom, and South
Africa which are subject to income taxes in their respective countries. For the
years ended December 31, 1998 and 1997, the Company recorded foreign income tax
expense of $127,166 and $343,342, respectively, related to its United Kingdom
and Australian subsidiaries. Pre-tax income (loss) attributable to foreign
operations was approximately $(8,891,000), $(3,093,000) and $633,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. The Company's
Australian subsidiary paid income taxes of approximately $150,000, $450,000 and
$2,063,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are translated
at current exchange rates, while revenues and expenses are translated at average
rates prevailing during the year. The effects of exchange rate fluctuations have
been reported in other comprehensive income (loss). The effect on the statements
of operations of transaction gains and losses is insignificant for all years
presented.
COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consists entirely of foreign
currency translation adjustments for all years presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
21
24
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
C. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended by FASB Statement 137, is
required to be adopted in years beginning after June 15, 2000. Statement 133
requires all derivatives to be recognized as either assets or liabilities in the
balance sheet and be measured at fair value. The Company is currently evaluating
Statement 133 and because the Company expects to have a minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a material effect on earnings or the financial position of
the Company.
RECLASSIFICATIONS
Certain amounts from the prior year financial statements have been reclassified
to conform to current year presentation.
D. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The balances of the major
classes of property, plant and equipment at December 31, 1999 and 1998 are as
follows:
1999 1998
----------------------------
Land and improvements $ 1,159,208 $ 871,234
Buildings and improvements 6,482,426 5,178,317
Machinery and equipment 19,365,976 17,765,662
----------------------------
$27,007,610 $23,815,213
============================
Depreciation expense for the years ended December 31, 1999, 1998, and 1997, was
$2,931,686, $2,729,062, and $2,123,699, respectively. Depreciation is primarily
computed using the straight-line method based on the expected useful lives of
the assets. The estimated useful lives for buildings and improvements range from
10 to 31.5 years; the estimated useful lives for machinery and equipment range
from 2.5 to 12.5 years.
22
25
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS
Long-term obligations consist of the following:
As of December 31
---------------------------
1999 1998
Senior Notes, interest at 11% payable
semi-annually in arrears, due 2007 $120,000,000 $120,000,000
Note payable by CCE for purchase of
Colorado facility; interest rate of
7.445%; payable in monthly installments
through 5/1/04 1,567,076 --
Note payable by CCE for idler equipment;
interest rate of 8.845%; payable in monthly
installments through 11/27/04 909,717 --
Term loan payable by Australian subsidiary;
interest rate of 7.55%; maturity date of 4/26/00 2,656,800 --
Note payable by South Africa for purchase of
computer system; variable interest rate
(15.551% at 12/31/99); payable in monthly
installments through 12/31/04 81,179 --
BCE Seller Notes -- 2,101,474
Note payable by CCE Pty Ltd -- 91,233
Obligations under capital leases 813,293 1,128,860
---------------------------
126,028,065 123,321,567
Less current maturities 3,140,588 1,095,106
---------------------------
$122,887,477 $122,226,461
===========================
Maturities of long-term obligations are as follows:
2000 $ 3,140,588
2001 614,172
2002 434,321
2003 334,831
2004 304,295
Thereafter 121,199,858
------------
$126,028,065
============
The $120 million 11% Senior Notes due 2007 ("Senior Notes") are registered under
the Securities Act of 1933. Interest on the notes is payable semi-annually in
arrears. The Senior Notes are redeemable at the option of the Company, in whole
or in part, any time on or after 2002 subject to certain call premiums. The
Senior Notes are guaranteed by the Company's domestic subsidiaries and certain
of its Australian subsidiaries and contain various restrictive covenants that,
among other things, place limitations on the sale of assets, payment of
dividends, and incurring additional indebtedness and restrict transactions with
affiliates.
23
26
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS -- CONTINUED
During the second quarter of 1999, the Company's United States operations
purchased a manufacturing facility previously leased in Colorado for $1,600,000.
The purchase was financed through a term note bearing an interest rate of 7.445%
with a maturity date of May 1, 2004. The note is secured by the property. The
Company's United States operations also financed the purchase of equipment for
production of a new idler. This note payable bears an interest rate of 8.845%,
matures on November 27, 2004, and is secured by the equipment.
In July 1999, the Company's Australian subsidiary renegotiated its revolving
credit facility. The new agreement provides for a term loan of approximately
$2,900,000. These proceeds were used to pay the outstanding balance of the BCE
seller notes for approximately $2,100,000 and the balance for working capital.
In the fourth quarter of 1999, the Company's South African subsidiary purchased
a new computer system for approximately $82,000. The purchase was financed
through a note payable maturing on December 31, 2004. The interest rate is
variable and was 15.551% at December 31, 1999.
CCE, GCC and Bank One, Cleveland, NA are parties to a credit facility and
security agreement dated September 14, 1992, as amended, restated and
consolidated through March 28, 2000, ("Revolving Credit Facility") pursuant to
which Bank One has provided CCE and GCC jointly with a line of credit of $30
million. The availability under the Revolving Credit Facility is equal to the
sum of (i) 85% of eligible accounts receivable and (ii) 55% of eligible
inventory. The Revolving Credit Facility is guaranteed by the Company and
secured by a lien on substantially all of the assets of CCE and GCC. In
addition, the Revolving Credit Facility contains certain financial and other
covenants which, among other things, establish minimum debt coverage and net
working capital requirements. The Revolving Credit Facility will be fully
revolving until final maturity on June 30, 2003, and will bear interest at a
fluctuating rate based on the prime rate. At December 31, 1999, the Company had
an outstanding balance under the Revolving Credit Facility of $5,768,503. The
weighted average interest rate for this facility was 8.3% in 1999.
The Company's Australian subsidiary has a revolving credit facility with the
National Australia Bank Limited which provides a line of credit of $3.0 million
(Australian dollars). The facility is secured by a lien on substantially all of
the assets of the BCE subsidiaries, bears interest at a fluctuating rate based
on the base rate of the National Australia Bank, and matures on July 31, 2000.
At December 31, 1999, approximately $1.6 million (Australian dollars) was
available for use. The outstanding balance under this facility at December 31,
1999 was $944,808 (U.S.$). The weighted average interest rate for this facility
was 9.5% and 8.5% in 1999 and 1998, respectively.
The Company's United Kingdom subsidiary has an overdraft facility with the HSBC
Bank of 1.1 million British pounds sterling. The facility is secured by certain
assets of the Subsidiary, bears interest at a fluctuating rate of 2.75% above
the HSBC Bank base rate, and matures in October 2000. At December 31, 1999,
approximately 2,100 pounds was available for use. The outstanding balance under
this facility at December 31, 1999 was $1,773,438 (U.S.$). The weighted average
interest rate for this facility was 8% and 9% in 1999 and 1998, respectively.
24
27
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS -- CONTINUED
The Company's South African subsidiary has a credit facility with the Standard
Bank of South Africa of 3.0 million South African rand. The facility is secured
by the trade receivables of the subsidiary and bears interest at a fluctuating
rate of 1.5% above the bank's prime lending rate. The agreement continues
indefinitely until termination by either party with a minimum of three months
written notice. At December 31, 1999, approximately 2.3 million rand was
available for use. The outstanding balance under this facility at December 31,
1999 was $113,750 (U.S.$). The weighted average interest rate for this facility
was 18% and 22% in 1999 and 1998, respectively.
During 1999, 1998, and 1997, the Company paid interest of $14,590,746,
$12,456,957, and $8,153,452, respectively.
F. LEASING ARRANGEMENTS
CCE has a capital lease for land and building with a lease term of ten years
which contains a purchase option exercisable at any time. In addition, CCE, GCC,
and the Company's foreign subsidiaries have numerous capital leases for certain
machinery and equipment. Amortization of these assets is included in
depreciation expense in the statement of operations. Capital lease obligations
of approximately $189,000 and $55,000 were incurred in 1999 and 1998. The gross
amount of assets recorded under capital leases and the related accumulated
amortization at December 31, 1999 and 1998 are as follows:
1999 1998
---------------------------
Asset Balances:
Land $ 20,000 $ 20,000
Buildings 380,000 380,000
Machinery and Equipment 1,890,732 1,856,123
---------------------------
$2,290,732 $2,256,123
===========================
Accumulated Amortization:
Buildings $ 75,397 $ 63,333
Machinery and Equipment 1,041,355 766,080
---------------------------
$1,116,752 $ 829,413
===========================
25
28
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
F. LEASING ARRANGEMENTS -- CONTINUED
The subsidiaries of the Company also have various leases for office space,
warehouse facilities, office equipment, and automobiles and trucks which are
accounted for as operating leases. Rent expense related to these operating
leases for the years ended December 31, 1999, 1998, and 1997 was approximately
$2,525,000, $2,401,000, and $1,723,000, respectively. Future minimum lease
payments for obligations under capital leases and for operating leases having
initial or remaining noncancelable lease terms in excess of one year are as
follows:
Capital Operating
Leases Leases
----------------------
2000 $304,040 $ 720,022
2001 447,905 602,490
2002 193,854 534,195
2003 40,032 357,973
2004 -- 36,722
----------------------
Total minimum lease payments 985,831 $2,251,402
Amounts representing interest 172,538 ==========
--------
Present value of net minimum
lease payments (including
current portion of $400,147) $813,293
========
G. EMPLOYEE BENEFIT PLANS
CCE maintains a defined benefit plan covering all union hourly-paid employees at
its Winfield plant. The contributions of CCE are made in amounts sufficient to
fund the plan's service cost on a current basis and meet the minimum funding
requirements of the Employee Retirement Income Security Act of 1974, as amended.
Actuarial gains and losses are amortized over a 15 year period, and funding of
the initial prior service costs plus interest thereon is over a 30 year period.
The actuarial computations use the "projected unit credit cost method," which
assumed a weighted-average discount rate on benefit obligations of 7.25% and 6%
in 1999 and 1998, respectively, and a weighted-average expected long-term rate
of return on plan assets of 8% and 7% in 1999 and 1998, respectively.
26
29
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
G. EMPLOYEE BENEFIT PLANS -- CONTINUED
The following table sets forth the change in benefit obligation, change in plan
assets, funded status and amounts recognized in the Consolidated Balance Sheets
as of December 31, 1999 and 1998, of the Company's defined benefit plan.
1999 1998
---------------------------
Change in benefit obligation:
Benefit obligation at
beginning of year $ 5,112,244 $3,221,103
Service cost 140,057 169,558
Interest cost 370,638 193,266
Actuarial loss (gain) (847,619) 1,690,487
Benefits paid (177,706) (162,170)
---------------------------
Benefit obligation at end of year 4,597,614 5,112,244
---------------------------
Change in plan assets:
Fair value of plan assets at
beginning of year 5,260,652 3,960,135
Actual return on plan assets 584,057 1,191,761
Company contributions -- 270,926
Benefits paid (177,706) (162,170)
---------------------------
Fair value of plan assets at end of year 5,667,003 5,260,652
---------------------------
Funded status:
Plan assets in excess of projected
benefit obligation 1,069,389 148,408
Unrecognized prior service cost (300,303) 571,159
Unrecognized net actuarial gain (1,028,512) (763,642)
Unrecognized transition asset (5,412) (8,118)
---------------------------
Accrued benefit cost $ (264,838) $ (52,193)
===========================
1999 1998 1997
-----------------------------------------
Components of net
periodic benefit cost:
Service cost $ 140,057 $ 169,558 $ 83,739
Interest cost 370,638 193,266 243,004
Expected return on
plan assets (584,057) (1,191,761) (632,625)
Amortization of prior
service cost 44,416 90,363 117,264
Amortization of
transition asset (2,706) (2,706) (2,706)
Recognized gain 244,297 940,129 346,100
-----------------------------------------
Net periodic benefit cost $ 212,645 $ 198,849 $ 154,776
=========================================
27
30
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
G. EMPLOYEE BENEFIT PLANS -- CONTINUED
CCE also maintains a defined contribution plan covering substantially all
salaried and non-union hourly employees. CCE makes annual contributions
(approximately $548,000, $564,000, and $452,000, in 1999, 1998 and 1997,
respectively) which fully fund retirement benefits. No participant contributions
to the plan are permitted. CCE also maintains a defined contribution savings and
profit sharing plan which covers substantially all salaried and non-union hourly
employees. Employees may elect to contribute up to 16% of their compensation.
CCE will match (approximately $335,000, $324,000, and $302,000 in 1999, 1998 and
1997, respectively) a percentage of employee contributions up to 6% of each
employee's compensation.
GCC has a retirement savings plan covering all employees meeting certain
eligibility requirements. Under the terms of the plan, GCC voluntarily makes
annual cash contributions based on eligible employees' compensation. Expense for
the years ended December 31, 1999, 1998 and 1997 was approximately $145,000,
$197,000, and $164,000, respectively, which was equal to 2.5% of eligible
employees compensation in 1999 and 3% of eligible employees compensation for
1998 and 1997.
H. RELATED PARTY TRANSACTIONS
Management fees are charged by Nesco, Inc., an affiliate of NES Group, Inc., to
provide general management oversight services, including legal, financial,
strategic planning and business development evaluation for the benefit of the
Company. Effective April 1, 1997, the Company and Nesco, Inc. entered into a new
management agreement under which the Company has agreed to pay Nesco, Inc. fees
for such services equal to 5% of the Company's Adjusted EBITDA earnings
(earnings before interest and estimated taxes, depreciation, amortization and
miscellaneous expense or income). Prior to April 1, 1997, the amount of
management fees paid was based on a percentage of sales. The Company incurred
management fee expenses of approximately $467,000, $933,000, and $1,668,000 for
the years ended December 31, 1999, 1998, and 1997, respectively.
The subsidiaries of the Company have entered into a tax payment agreement with
NES Group, Inc. providing for monthly payments by each subsidiary to NES Group,
Inc. to fund the income tax liability attributable to the Company's operations.
The Company incurred charges to stockholder's equity for income taxes of
approximately $149,000, $1,922,000, and $3,295,000 for the years ended December
31, 1999, 1998, and 1997, respectively. At December 31, 1999 and 1998, the
Company had an accrual for income tax payments owed to NES Group, Inc. of
approximately $20,000 and $1,176,000, respectively.
28
31
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
I. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheet for accounts receivable and accounts payable approximate their
fair value.
Notes payable and long-term debt: The carrying amounts of the Company's
borrowings under its short-term revolving credit arrangements and variable rate
long-term debt approximate their fair value. The fair value of the Company's
Senior Notes is based on the quoted market value. The fair value of the
Company's remaining fixed rate long-term debt is based on the present value of
future cash outflows.
The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------
(in thousands)
Cash and cash equivalents $ 18,300 $ 18,300 $ 26,351 $ 26,351
Accounts receivable 30,469 30,469 44,424 44,424
Accounts payable (21,506) (21,506) (40,523) (40,523)
Notes payable (8,601) (8,601) (2,662) (2,662)
Long-term debt 125,215 67,570 122,193 105,393
Accounts receivable from customers in the coal mining industry were
approximately 66% and 72% at December 31, 1999 and 1998, respectively. The
Company's subsidiaries perform periodic credit evaluations of their customers'
financial condition and generally do not require collateral. Credit losses
relating to customers in the coal mining industry have consistently been within
management's expectations and are comparable to losses for the portfolio as a
whole.
Provisions for credit losses were approximately $383,000, $586,000, and $168,000
in 1999, 1998, and 1997, respectively. Accounts written off, net of recoveries,
were approximately $491,000, $53,000, and $437,000 in 1999, 1998, and 1997,
respectively.
29
32
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted FASB Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of Statement 131 did not affect results of operations or financial
position, but did affect the disclosure of segment information.
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
mobile home products. The conveyor equipment business, which comprised
approximately 84.6%, 84.9%, and 83.4% of net sales for 1999, 1998, and 1997,
respectively, markets its products in four main business areas. The mining
equipment business area includes the design, manufacture and testing (and,
outside the United States, installation, monitoring and maintenance) of complete
belt conveyor systems and components for mining application primarily in the
coal industry. The conveyor components business area manufactures and sells
components for conveyor systems primarily for resale through distributor
networks. The engineered systems business area uses specialized project
management and engineering skills to combine mining equipment products,
purchased equipment, steel fabrication and other outside services for sale as
complete conveyor equipment systems that meet specific customer requirements.
The bulk conveyor equipment business area designs and manufactures a complete
range of conveyor equipment sold to transport bulk materials, such as cement,
lime, food products and industrial waste.
The Company's mobile home products business manufactures and/or refurbishes axle
components sold directly to mobile home manufacturers. As part of this segment
the Company also sells mounted tires and rims to the mobile home industry.
Included in the other category is primarily the manufacture and sale of air
filtration equipment for use in enclosed environments, principally in the
textile industry. The manufacturing requirements for these products are
generally compatible with conveyor equipment production and thus maximize
utilization of the Company's manufacturing facilities for its primary products.
The Company evaluates performance and allocates resources based on operating
income before restructuring charges and allocation of management fee,
amortization and corporate expenses. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies under Note C. The Company's reportable segments are business
units that offer different products and services. The reportable segments are
each managed separately because they manufacture and distribute distinct
products.
30
33
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION -- CONTINUED
Year ended December 31
1999 1998 1997
----------------------------------
(in thousands)
Net sales:
Conveyor equipment $179,130 $213,969 $178,037
Mobile home products 30,293 35,204 33,021
Other 2,297 2,899 2,459
----------------------------------
Total net sales $211,720 $252,072 $213,517
==================================
Depreciation and amortization:
Conveyor equipment $ 3,368 $ 3,151 $ 2,498
Mobile home products 121 181 191
Other 10 12 11
Corporate amortization 51 49 8
----------------------------------
Total depreciation and amortization $ 3,550 $ 3,393 $ 2,708
==================================
Segment operating income:
Conveyor equipment $ 7,738 $ 16,425 $ 21,423
Mobile home products 171 943 1,017
Other 119 253 179
----------------------------------
Segment operating income 8,028 17,621 22,619
Restructuring charge 1,106 1,127 --
Management fee 467 933 1,669
Amortization expense 619 663 584
Corporate expense 520 567 353
----------------------------------
Total operating income 5,316 14,331 20,013
Interest expense 15,225 14,658 12,308
Interest income (914) (1,568) (925)
Miscellaneous, net (267) (61) 449
----------------------------------
Income (loss) before income taxes $ (8,728) $ 1,302 $ 8,181
==================================
Segment assets:
Conveyor equipment $ 95,949 $113,542 $ 90,045
Mobile home products 4,891 6,840 5,656
Other 873 887 863
----------------------------------
Total segment assets 101,713 121,269 96,564
Corporate assets 21,190 24,488 33,161
----------------------------------
Total assets $122,903 $145,757 $129,725
==================================
Capital expenditures:
Conveyor equipment $ 3,951 $ 2,891 $ 3,425
Mobile home products 56 140 206
Other 23 9 7
----------------------------------
Total capital expenditures $ 4,030 $ 3,040 $ 3,638
==================================
31
34
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION -- CONTINUED
GEOGRAPHIC AREA DATA
Year ended December 31
1999 1998 1997
--------------------------------------
(in thousands)
Net sales:
United States $146,733 $168,933 $168,241
Australia 39,223 61,097 41,567
United Kingdom 21,095 18,802 4,689
Other countries 4,994 4,045 616
Eliminations -- transfers (325) (805) (1,596)
--------------------------------------
Total net sales $211,720 $252,072 $213,517
======================================
Operating income (loss):
United States $ 13,670 $ 16,384 $ 18,118
Australia (6,407) (941) 1,538
United Kingdom (1,542) (537) 386
Other countries (432) (575) (29)
Eliminations 27 -- --
--------------------------------------
Total operating income $ 5,316 $ 14,331 $ 20,013
======================================
Long lived assets:
United States $ 8,224 $ 6,109 $ 6,028
Australia 4,882 5,909 6,257
United Kingdom 3,165 3,422 833
Other countries 431 326 123
--------------------------------------
Total long lived assets $ 16,702 $ 15,766 $ 13,241
======================================
Net sales are attributed to countries based on the location of the subsidiary
where the sale occurs.
In 1999, sales to the Company's largest customer were approximately $24.5
million, or 11.6%, of the Company's total net sales. In 1998, sales to the
Company's two largest customers were approximately $32.7 million and $30.8
million, respectively, or 13.0% and 12.2%, of the Company's total net sales. In
1997, sales to the Company's largest customer were approximately $27.9 million,
or 13.1%, of the Company's total net sales. Sales to these customers are
reported in the net sales for the Conveyor Equipment business segment.
32
35
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
Effective September 23, 1999, the Company's domestic subsidiaries, Continental
Conveyor & Equipment Company (CCE) and Goodman Conveyor Company (GCC), and
certain of its Australian subsidiaries, all of which are wholly owned, are the
guarantors of the Senior Notes. Prior to this date, CCE and GCC were the only
guarantors of the Senior Notes. The guarantees are full, unconditional, and
joint and several. Separate financial statements of these guarantor subsidiaries
are not presented as management has determined that they would not be material
to investors. The Company's United Kingdom and South African subsidiaries are
not guarantors of the Senior Notes. The 1999 operations and cash flows of the
Company's guarantor Australian subsidiaries are included in the "Combined
Guarantor Subsidiaries" column in the following summarized consolidating
financial statements.
Summarized consolidating balance sheets for 1999 and 1998 and consolidating
statements of operations and cash flow statements for 1999, 1998, and 1997 for
the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries are
as follows (in thousands):
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------
December 31, 1999:
Current assets:
Cash and cash equivalents $ 17,244 $ 955 $ 101 $ -- $ 18,300
Accounts receivable, net 2,039 24,797 5,759 (2,126) 30,469
Inventories -- 27,578 3,750 -- 31,328
Other current assets 36 1,544 361 -- 1,941
-------------------------------------------------------------------
Total current assets 19,319 54,874 9,971 (2,126) 82,038
Property, plant, and
equipment, net -- 11,259 5,443 -- 16,702
Goodwill, net -- 18,736 907 -- 19,643
Investment in subsidiaries 60,009 19,800 -- (79,809) --
Deferred financing costs 3,769 -- -- -- 3,769
Other assets 141 31 1,099 (520) 751
-------------------------------------------------------------------
Total assets $ 83,238 $104,700 $17,420 $(82,455) $122,903
===================================================================
Current liabilities:
Notes payable $ -- $ 6,779 $ 2,311 $ (489) $ 8,601
Trade accounts payable 387 17,022 6,242 (2,145) 21,506
Accrued compensation and
employee benefits -- 4,553 538 -- 5,091
Accrued interest 3,300 -- -- -- 3,300
Other accrued liabilities 171 3,949 136 (1) 4,255
Current maturities of
long-term obligations -- 3,120 21 -- 3,141
-------------------------------------------------------------------
Total current liabilities 3,858 35,423 9,248 (2,635) 45,894
Senior Notes 120,000 -- -- -- 120,000
Other long-term obligations -- 2,675 212 -- 2,887
Stockholder's equity
(deficit) (40,620) 66,602 7,960 (79,820) (45,878)
-------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 83,238 $104,700 $17,420 $(82,455) $122,903
===================================================================
33
36
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
--------------------------------------------------------------------------
December 31, 1998:
Current assets:
Cash and cash equivalents $ 19,969 $ 684 $ 5,698 $ -- $ 26,351
Accounts receivable, net 292 20,556 25,593 (2,017) 44,424
Inventories -- 24,869 7,381 -- 32,250
Other current assets 38 1,782 4,682 (4,229) 2,273
--------------------------------------------------------------------------
Total current assets 20,299 47,891 43,354 (6,246) 105,298
Property, plant, and
equipment, net -- 6,109 9,657 -- 15,766
Goodwill, net -- 11,921 7,749 -- 19,670
Investment in subsidiaries 58,709 11,892 2,697 (73,298) --
Deferred financing costs 4,289 -- -- -- 4,289
Other assets 192 12,895 476 (12,829) 734
--------------------------------------------------------------------------
Total assets $ 83,489 $90,708 $63,933 $(92,373) $145,757
==========================================================================
Current liabilities:
Notes payable $ -- $ 307 $ 2,662 $ (307) $ 2,662
Trade accounts payable 409 13,079 30,971 (3,936) 40,523
Accrued compensation and
employee benefits -- 4,128 1,214 -- 5,342
Accrued interest 3,300 -- -- -- 3,300
Other accrued liabilities 171 4,675 3,297 (28) 8,115
Current maturities of
long-term obligations -- 147 948 -- 1,095
--------------------------------------------------------------------------
Total current liabilities 3,880 22,336 39,092 (4,271) 61,037
Senior Notes 120,000 -- -- -- 120,000
Other long-term obligations -- 194 14,062 (12,030) 2,226
Stockholder's equity (40,391) 68,178 10,779 (76,072) (37,506)
(deficit)
--------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 83,489 $90,708 $63,933 $(92,373) $145,757
==========================================================================
34
37
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1999:
Net sales $ -- $ 185,710 $ 26,089 $ (79) $211,720
Cost of products sold -- 156,752 23,283 (79) 179,956
----------------------------------------------------------------------
Gross profit -- 28,958 2,806 -- 31,764
Total operating expenses 571 21,123 4,754 -- 26,448
----------------------------------------------------------------------
Operating income (loss) (571) 7,835 (1,948) -- 5,316
Interest expense 13,772 1,268 185 -- 15,225
Interest income (914) -- -- -- (914)
Miscellaneous, net -- 106 (373) -- (267)
----------------------------------------------------------------------
Income (loss) before foreign
income taxes (13,429) 6,461 (1,760) -- (8,728)
Foreign income taxes -- -- -- -- --
----------------------------------------------------------------------
Net income (loss) $(13,429) $ 6,461 $ (1,760) $ -- $ (8,728)
=======================================================================
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1998:
Net sales $ - $ 168,933 $ 83,944 $ (805) $ 252,072
Cost of products sold - 135,291 74,650 (805) 209,136
------------------------------------------------------------------------
Gross profit - 33,642 9,294 - 42,936
Total operating expenses 616 16,642 11,347 - 28,605
------------------------------------------------------------------------
Operating income (loss) (616) 17,000 (2,053) - 14,331
Interest expense 13,776 (226) 1,108 - 14,658
Interest income (1,568) - - - (1,568)
Miscellaneous, net - 7 (68) - (61)
------------------------------------------------------------------------
Income (loss) before foreign income (12,824) 17,219 (3,093) - 1,302
taxes
Foreign income taxes - - 127 - 127
------------------------------------------------------------------------
Net income (loss) $ (12,824) $17,219 $(3,220) $ - $ 1,175
========================================================================
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1997:
Net sales $ - $ 168,241 $ 46,872 $ (1,596) $ 213,517
Cost of products sold - 133,266 38,735 (1,596) 170,405
------------------------------------------------------------------------
Gross profit - 34,975 8,137 - 43,112
Total operating expenses 353 16,504 6,242 - 23,099
------------------------------------------------------------------------
Operating income (loss) (353) 18,471 1,895 - 20,013
Interest expense 10,328 810 1,170 - 12,308
Interest income (925) - - - (925)
Miscellaneous, net - 357 92 - 449
------------------------------------------------------------------------
Income (loss) before foreign income (9,756) 17,304 633 - 8,181
taxes
Foreign income taxes - - 343 - 343
------------------------------------------------------------------------
Net income (loss) $ (9,756) $ 17,304 $ 290 $ - $ 7,838
========================================================================
35
38
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1999:
Net cash provided by (used in)
operating activities $ (12,567) $ 2,657 $ (1,742) $ (609) $ (12,261)
Investing activities:
Purchase of property, plant and
equipment - (3,331) (699) - (4,030)
Proceeds from disposals of PP&E - 51 1,040 - 1,091
Investment in subsidiaries (1,300) 1,300 - - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (1,300) (1,980) 341 - (2,939)
Financing activities:
Net increase (decrease) in
borrowings on notes payable - 6,456 (762) 307 6,001
Proceeds from long-term obligations - 5,434 82 - 5,516
Principal payments on long-term
obligations - (3,039) (173) - (3,212)
Distributions for income taxes - (1,306) - - (1,306)
Distributions for interest on 11,142 (11,142) - - -
senior notes
Intercompany loan activity - (3,361) 3,011 350 -
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 11,142 (6,958) 2,158 657 6,999
Exchange rate changes on cash - 260 (62) (48) 150
------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (2,725) (6,021) 695 - (8,051)
Cash and cash equivalents at beginning
of year 19,969 6,976 (594) - 26,351
------------------------------------------------------------------------
Cash and cash equivalents at end of
year $ 17,244 $ 955 $ 101 $ - $ 18,300
========================================================================
36
39
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1998:
Net cash provided by (used in)
operating activities $ (12,553) $ 15,194 $ 5,595 $ 356 $ 8,592
Investing activities:
Purchase of property, plant and
equipment - (1,204) (1,836) - (3,040)
Proceeds from disposals of PP&E 26 124 - 150
Purchase of Huwood - - (4,966) - (4,966)
Investment in subsidiaries (8,751) 5,061 3,690 - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (8,751) 3,883 (2,988) - (7,856)
Financing activities:
Net increase in borrowings on notes
payable - 307 2,254 (307) 2,254
Principal payments on long-term
obligations - (5,429) (960) - (6,389)
Distributions for income taxes - (746) - - (746)
Distributions for interest on 13,200 (13,200) - - -
senior notes
Intercompany loan activity - (1,647) 1,647 - -
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 13,200 (20,715) 2,941 (307) (4,881)
Exchange rate changes on cash - - (338) (49) (387)
------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (8,104) (1,638) 5,210 - (4,532)
Cash and cash equivalents at beginning
of year 28,073 2,322 488 - 30,883
------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 19,969 $ 684 $ 5,698 $ - $ 26,351
========================================================================
37
40
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
Year ended December 31, 1997:
Net cash provided by (used in)
operating activities $ (5,930) $ 17,528 $ (1,422) $ - $ 10,176
Investing activities:
Purchases of property, plant, and
equipment - (1,406) (2,232) - (3,638)
Proceeds from disposals of PP&E - 18 191 - 209
Purchase of BCE, net of notes to - (7,189) - - (7,189)
seller
Purchase of Hewitt-Robins - (12,895) - - (12,895)
Purchase of Tufkon - (698) - - (698)
Purchase of MECO - (175) 1,683 - 1,508
Investment in subsidiaries (49,958) 44,423 5,535 - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (49,958) 22,078 5,177 - (22,703)
Financing activities:
Proceeds from issuance of senior 120,000 - - - 120,000
notes
Deferred financing costs (5,199) - - - (5,199)
Net decrease in borrowings on notes
payable - (12,395) (465) - (12,860)
Proceeds from long-term obligations - 4,547 286 - 4,833
Principal payments on long-term
obligations - (18,001) (802) - (18,803)
Distributions for income taxes - (3,295) - - (3,295)
Distributions for interest on 9,160 (9,160) - - -
senior notes
Payment to former shareholders of - - (2,927) - (2,927)
BCE
Dividends paid (40,000) - - - (40,000)
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 83,961 (38,304) (3,908) - 41,749
Exchange rate changes on cash - - 639 - 639
------------------------------------------------------------------------
Increase in cash and cash equivalents 28,073 1,302 486 - 29,861
Cash and cash equivalents at beginning
of year - 1,020 2 - 1,022
------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 28,073 $ 2,322 $ 488 $ - $ 30,883
========================================================================
L. CONTINGENCIES
The Company is not a party to any pending legal proceeding which it believes
could have a material adverse effect upon its results of operations or financial
condition, or to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the directors and
executive officers of the Company:
Name Age Position with the Company
C. Edward Bryant, Jr. 65 President and Chief Executive Officer
Jimmy L. Dickinson 57 Vice President and Chief Financial Officer
Jerry R. McGaha 61 Senior Vice President of Sales and Engineering
Edward F. Crawford 60 Director
Donald F. Hastings 71 Director
Joseph L. Mandia 58 Director
Robert J. Tomsich 69 Director
John R. Tomsich 33 Director
James W. Wert 53 Director
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
Mr. Bryant has served as President and Chief Executive Officer of the Company
since its inception. Mr. Bryant has also served as President and Chief Executive
Officer of Continental Conveyor & Equipment Company since 1982 and as Chairman
of the Board of Directors of CCE Pty. Ltd. since 1996.
Mr. Dickinson has served as Vice President and Chief Financial Officer of the
Company since its inception. Mr. Dickinson has also served as Vice President of
Finance of Continental Conveyor & Equipment Company since 1973 and as a Director
of CCE Pty. Ltd. since 1996.
Mr. McGaha has served as Senior Vice President of Sales and Engineering of the
Company since its inception. Mr. McGaha has also served as Senior Vice President
of Sales and Engineering of Continental Conveyor & Equipment Company since 1996
and as Director of CCE Pty. Ltd. since 1996. In addition to the foregoing, Mr.
McGaha was Vice President of Sales and Engineering of Continental Conveyor &
Equipment Company from 1990 to 1996.
Mr. Crawford has served as a Director of the Company since its inception. In
addition to his service with the Company, Mr. Crawford has served as Chairman
and Chief Executive Officer and a Director of Park-Ohio Industries, Inc. since
1992.
Mr. Hastings has served as a Director of the Company since its inception. In
addition to his service with the Company, Mr. Hastings served as Chairman and
Chief Executive Officer and as Director of Lincoln Electric Company from 1992 to
1997. Since 1998, Mr. Hastings has also served as a Director of Paragon
Corporate Holdings, Inc., a sister corporation of the Company.
Mr. Mandia has served as a Director of the Company since its inception. Mr.
Mandia has also served as Group Vice President of Nesco, Inc. since 1988.
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Mr. Robert Tomsich has served as a Director of the Company since its inception.
In addition, Mr. Robert Tomsich has served as President and Director of Nesco,
Inc. (including predecessors of Nesco, Inc.) since 1956. Since 1997, Mr. Tomsich
has also served as a Director of Paragon Corporate Holdings, Inc., a sister
corporation of the Company. Mr. Robert Tomsich is the father of Mr. John
Tomsich.
Mr. John Tomsich has served as a Director of the Company since its inception. In
addition, Mr. John Tomsich has served as Vice President of Nesco, Inc. since
1995 and in various other management positions with Nesco, Inc. since 1990.
Since 1997, Mr. Tomsich has also served as a Director of Paragon Corporate
Holdings, Inc., a sister corporation of the Company. Mr. John Tomsich is the son
of Mr. Robert Tomsich.
Mr. Wert has served as a Director of the Company since its inception. Prior to
his service with the Company, Mr. Wert held a variety of executive management
positions with KeyCorp, a financial services company based in Cleveland, Ohio,
and KeyCorp's predecessor, Society Corporation. Mr. Wert served as Senior
Executive Vice President and Chief Investment Officer of KeyCorp from 1995 to
1996. Prior to that time, he served as Senior Executive Vice President and Chief
Financial Officer of KeyCorp for two years and Vice Chairman, Director and Chief
Financial Officer of Society Corporation for four years. Since 1993, Mr. Wert
has served as an outside Director, and currently serves as Chairman of the
Executive and Compensation Committees of the Board of Directors, of Park-Ohio
Industries, Inc. Since 1998, Mr. Wert has also served as a Director of Paragon
Corporate Holdings, Inc., a sister corporation of the Company.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation of
the Company's Chief Executive Officer and other most highly compensated officers
of the Company having total annual salary and bonus in excess of $100,000.
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
C. Edward Bryant, Jr., 1999 $ 230,004 $ 94,817 $ 15,495
President and Chief 1998 200,004 84,513 15,488
Executive Officer 1997 187,344 66,119 15,446
Jerry R. McGaha, 1999 126,660 32,217 14,483
Senior Vice President of 1998 122,400 31,335 14,514
Sales and Engineering 1997 116,600 26,983 12,877
Jimmy L. Dickinson 1999 138,243 64,340 11,243
Vice President and Chief 1998 133,893 52,205 10,509
Financial Officer 1997 125,277 27,436 10,369
(1) Amounts shown reflect contributions made by the Company on behalf of the
named executives under the Continental Conveyor & Equipment Company Savings
and Profit Sharing Plan and the Continental Conveyor & Equipment Retirement
Plan for Salaried and Hourly (Non-Union) Employees at Salyersville,
Kentucky. No amounts shown were received by any of the named executives.
DIRECTOR COMPENSATION
Each director of the Company not employed by the Company or any entity
affiliated with the Company is entitled to receive $25,000 per year for serving
as a director of the Company. In addition, the Company will reimburse such
director for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors.
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PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the outstanding
equity securities of the Company as of March 15, 2000:
Number of Shares Title of Class Name and Address of Beneficial Owner
100 Common Stock, no par value NES Group, Inc.
6140 Parkland Boulevard
Mayfield Heights, OH 44124
All of the Company's issued and outstanding capital stock is owned by NES Group,
Inc. which is 100 percent beneficially owned by Mr. Robert J. Tomsich. Mr.
Tomsich may be deemed to be the beneficial owner of the Company's capital stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPANY FORMATION AND PROCEEDS FROM THE OFFERING
The Company is a Delaware corporation formed on February 4, 1997, for the
purpose of serving as a holding company for the operations conducted by
Continental (including the BCE Subsidiaries) and Goodman. All of the capital
stock of the Company has been issued to NES Group, Inc., which in turn,
transferred to the Company all of the outstanding capital stock of Continental
and Goodman. As a result, the Company is a wholly owned subsidiary of NES Group,
Inc., and each of Continental and Goodman is a wholly owned subsidiary of the
Company.
TAX PAYMENT AGREEMENT
The Company, Continental, and Goodman (each, a "Subsidiary") have entered into a
tax payment agreement with NES Group, Inc. ("Tax Payment Agreement") providing
for monthly payments by each Subsidiary to NES Group, Inc. in an amount equal to
the greater of (i) the total federal, state, local, and, under certain
circumstances, foreign income tax liability attributable to such Subsidiary's
operations for the monthly period, determined on an annualized basis, and (ii)
one-twelfth the total federal, state, local, and, under certain circumstances,
foreign income tax liability attributable to such Subsidiary's operations for
the year. The tax rates applied to such income are to be based on the maximum
individual federal, state, local, and foreign income tax rates imposed by
Section 1 of the Internal Revenue Code of 1986, as amended, and by the
equivalent provisions of state, local, and foreign income tax laws. These tax
payments will not recognize any future carry-forward or carry-back tax benefits
to the Company, Continental, or Goodman. Future direct and indirect Subsidiaries
of the Company shall also become parties to the Tax Payment Agreement.
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MANAGEMENT AGREEMENT
Effective April 1, 1997, the Company and Nesco, Inc. entered into a management
agreement ("Management Agreement"), the material terms of which are summarized
below. All of the outstanding capital stock of Nesco, Inc. is beneficially owned
by Robert J. Tomsich. Under the Management Agreement, Nesco, Inc., has agreed to
provide general management oversight services on a regular basis for the benefit
of the Company, in regard to business activities involving financial results,
legal issues, and long term planning relative to current operations and
acquisitions. Business development services include assistance in identifying
and acquiring potential acquisition candidates, including negotiations and
contractual preparations in connection therewith. Financial planning includes
assistance in developing banking relationships and monitoring cash investments
through professional money management accounts. Under the terms of the
Management Agreement, the Company has agreed to pay Nesco, Inc. a management fee
for such services equal to 5% of the Company's earnings before interest and
estimated taxes, depreciation, amortization, and other expense (income). The
aggregate amount expensed for management fees in 1999 under the Management
Agreement was $466,615. The management fee is payable in monthly installments.
The Management Agreement will remain in effect until terminated by either party
upon not less than 60 days written notice prior to an anniversary date of the
Management Agreement.
The Company will also separately employ, as required, independent auditors,
outside legal counsel, and other consulting services. Such services will be paid
directly by the Company.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report:
1. Consolidated Financial Statements.
The consolidated financial statements listed below together with the
report thereon of the independent auditors dated March 28, 2000, are
included in Item 8.
Report of Independent Auditors.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1999.
Consolidated Statements of Stockholder's Equity (Deficit) for each
of the three years in the period ended December 31, 1999.
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1999.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedules have been omitted because they are not applicable or the
required information is shown in the Consolidated Financial
Statements or the Notes to the Consolidated Financial Statements.
3. Exhibits Required to be Filed by Item 601 of Regulation S-K.
The information required by this paragraph is contained in the Index
of Exhibits to this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
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SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the 28th day of March, 2000.
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ C. Edward Bryant, Jr.
-------------------------
Name: C. Edward Bryant, Jr.
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Signature Title Date
/s/ C. Edward Bryant, Jr. President and Chief Executive Officer March 28, 2000
- -----------------------------------------
C. Edward Bryant, Jr. (Principal Executive Officer)
/s/ Jimmy L. Dickinson Vice President and Chief Financial Officer March 28, 2000
- -----------------------------------------
Jimmy L. Dickinson (Principal Financial Officer and Principal
Accounting Officer)
/s/ Edward F. Crawford Director March 28, 2000
- -----------------------------------------
Edward F. Crawford
/s/ Donald F. Hastings Director March 28, 2000
- -----------------------------------------
Donald F. Hastings
/s/ Joseph L. Mandia Director March 28, 2000
- -----------------------------------------
Joseph L. Mandia
/s/ John R. Tomsich Director March 28, 2000
- -----------------------------------------
John R. Tomsich
/s/ Robert J. Tomsich Director March 28, 2000
- -----------------------------------------
Robert J. Tomsich
/s/ James W. Wert Director March 28, 2000
- -----------------------------------------
James W. Wert
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by registrants which have not registered securities pursuant to
Section 12 of the Act.
No annual report to security holders covering the registrant's last fiscal year
and no proxy statement, form of proxy, or other proxy soliciting material with
respect to any annual or other meeting of security holders has been or will be
sent to security holders.
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Continental Global Group, Inc.
Form 10-K
Index of Exhibits
Exhibit
Number Description of Exhibit
- --------- ----------------------
3.1 Certificate of Incorporation of Continental Global Group, Inc., *
as currently in effect.
3.2 By-Laws of Continental Global Group, Inc., as currently in *
effect.
3.3 Certificate of Incorporation of Continental Conveyor & *
Equipment Company, as currently in effect.
3.4 By-Laws of Continental Conveyor & Equipment Company, as *
currently in effect.
3.5 Certificate of Incorporation of Goodman Conveyor Company, as *
currently in effect.
3.6 By-Laws of Goodman Conveyor Company, as currently in effect. *
4.1 Indenture, dated as of April 1, 1997, among Continental *
Global Group, Inc., Continental Conveyor & Equipment Company,
Goodman Conveyor Company, and the Trustee (containing, as
exhibits, specimens of the Series A Notes and the Series B
Notes).
10.1
(a) Revolving Credit Facility, dated as of September 14, 1992, as *
amended by Amendments I, II, and III, among Continental
Conveyor & Equipment Company, Goodman Conveyor Company, and
Bank One, Cleveland, NA.
(b) Amendment IV, dated as of December 31, 1998, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit
10.1 (b) to the Company's Form 10-Q for the quarter ended
March 31, 1999, and is incorporated herein by reference.)
(c) Letter of Amendment, dated as of July 26, 1999, to the
Revolving Credit Facility, dated as of September 14, 1992,
among Continental Conveyor & Equipment Company, Goodman
Conveyor Company, and Bank One, Cleveland, NA. (Filed as
Exhibit 10.1 (c) to the Company's Form 10-Q for the quarter
ended June 30, 1999, and is incorporated herein by reference.)
(d) Letter of Amendment, dated as of November 4, 1999, to the
Revolving Credit Facility, dated as of September 14, 1992,
among Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (d)
to the Company's Form 10-Q for the quarter ended September 30,
1999, and is incorporated herein by reference.)
(e) Amendment VI, dated as of March 28, 2000, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA.
10.2 Asset Purchase Agreement, dated as of March 3, 1997, among *
Continental Conveyor & Equipment Company, Process Technology
Holdings, Inc., and W.S. Tyler Incorporated, relating to the
Hewitt-Robins acquisition
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Continental Global Group, Inc.
Form 10-K
Index of Exhibits (Continued)
10.3 Management Agreement, dated as of April 1, 1997, between Continental *
Global Group, Inc. and Nesco, Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1997, among Continental *
Global Group, Inc., Continental Conveyor & Equipment Company,
Goodman Conveyor Company, and NES Group, Inc.
10.5 World Wide Purchase and Sale Agreement dated as of October 17, 1997,
by and among Continental Conveyor International Inc., Joy
Technologies, Inc., and certain affiliates of Joy Technologies Inc.
(The "Purchase Agreement"). (All exhibits to the Purchase Agreement
have been omitted, and Registrant will furnish supplementally to the
Commission, upon request, a copy of any omitted exhibit.) (Filed as
Exhibit 2.0 to Form 8-K filed November 3, 1997, and is incorporated
herein by reference.)
10.6 Credit Facility, dated as of July 18, 1999, among Continental
Conveyor & Equipment Pty. Ltd. and its subsidiaries and the National
Australia Bank Limited.
12 Statement regarding computation of ratio of earnings to fixed charges
21 Subsidiaries of registrant
27 Financial Data Schedule (filed electronically only)
* Incorporated by reference from Form S-4 Registration Number 333-27665 filed
under the Securities Act of 1933.
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